Supreme Court interprets ‘persons acting in concert’

By Vivek Vashi, Bharucha & Partners

Can a mere holding and subsidiary company relationship be considered to be one of “persons acting in concert” under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code)? This was recently answered by the Supreme Court in connected appeals in Daiichi Sankyo Co Ltd v Chiguripati and Daiichi Sankyo Co Ltd v Narayan & Anr.

In October 2007 Ranbaxy Laboratories agreed with Zenotech Laboratories and its promoter to buy 27.35% of Zenotech’s equity share capital at Rs160 (US$3) per share. Pursuant to the Takeover Code, Ranbaxy made a public offer to acquire a further 20% of shares in Zenotech at Rs160 per share. The post-offer announcement said Ranbaxy’s shareholding in Zenotech stood at 46.85%.

Vivek Vashi Bharucha & Partners
Vivek Vashi
Bharucha & Partners

On 11 June 2008, Daiichi Sankyo agreed to acquire Ranbaxy’s promoters’ 30.91% holding in Ranbaxy. Subsequently, in October 2008, Daiichi acquired more than 50% of Ranbaxy’s shareholding. As a consequence, Daiichi indirectly acquired Ranbaxy’s 46.85% holding in Zenotech’s and was obliged, under the Takeover Code, to acquire at least 20% of Zenotech’s shares. In January 2009 Daiichi made a public offer to Zenotech’s shareholders at Rs113.62 per share based on the then stock market price of Zenotech’s shares.

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Vivek Vashi is the mainstay of the litigation department at Bharucha & Partners.


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